Imperial Oil Q1 2025 Earnings Call Transcript

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May 2, 2025
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Operator

Day, and welcome to the Imperial Oil First Quarter twenty twenty five Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Peter Shaw, Vice President of Investor Relations. Please go ahead.

Peter Shaw
Peter Shaw
VP - Investor Relations at Imperial Oil

Good morning, everyone. Welcome to our first quarter earnings conference call. I'm joined this morning by Imperial's senior management team, Brad Corson, Chairman and CEO John Whalen, President Dan Lyons, Senior Vice President, Finance and Administration Cheryl Gomez Smith, Senior Vice President of the Upstream and Scott Maloney, Vice President of the Downstream. Today's comments include reference to non GAAP financial measures. The definitions and reconciliations of these measures can be found in Attachment six of our most recent press release and are available on our website with a link to this conference call.

Peter Shaw
Peter Shaw
VP - Investor Relations at Imperial Oil

Today's comments may contain forward looking information. Any forward looking information is not a guarantee of future performance, and actual future performance and operating results can vary materially depending on a number of factors and assumptions. Forward looking information and the risk factors and assumptions are described in further detail on our first quarter earnings release that we issued this morning as well as our most recent Form 10 ks. All of these documents are available on SEDAR plus EDGAR and our website, so I'd ask you to refer to those. Brad is going to start with some opening remarks and then hand it over to Dan, who is going to provide a financial update, and then Brad will provide an operations update.

Peter Shaw
Peter Shaw
VP - Investor Relations at Imperial Oil

Once that is done, we will follow with the Q and A session. So with that, I will turn it over to Brad for his opening remarks.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Thank you, Peter. Good morning, everybody, and welcome to our first quarter earnings call. I hope everyone is doing well, and it was great to see many of you at our recent Investor Day in Toronto. As you are likely aware, this will be my last earnings call with John replacing me following next week's AGM and my retirement. But before I leave, I'm really pleased to report another strong quarter for Imperial with earnings of $1,288,000,000, which represents an increase of earnings per share by 13% year over year and by 6% on a sequential quarter basis.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

This represents our highest ever first quarter earnings in the company's history. We also generated free cash flow of $1,150,000,000 and ended the quarter with nearly $1,800,000,000 of cash on hand. So that puts us in a very strong financial position. And as you may have seen in the release this morning, we intend to renew our normal course issuer bid later this quarter. So while there is ongoing volatility in commodity prices, I remain very confident in our ability to grow shareholder value over the long term.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Our upstream assets contributed solid production for the quarter, just shy of the record first quarter production we posted a year ago when adjusting for the divestment of XTO Energy Canada. Improved egress continued to support narrower heavy oil differentials than we've seen in the past and especially during the winter months, and this in turn supported our price realizations. Our downstream business delivered once again with strong margin capture in a recovering crack spread environment. This business continued to benefit from many durable competitive advantages, including integration, proximity to feedstocks, end market, efficient logistics, and our strong market position. Over the next few minutes, Dan and I will detail the results of this strong quarter.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

So now let's review the first quarter results. And as I just noted, earnings for the quarter were $1,288,000,000 with cash from operating activities of $1,760,000,000 when excluding the impact of working capital. Again, this represents our highest ever first quarter earnings. Now that sounded so good the first time I just had to say it again. These results reflect the strength of our integrated business model and our ability to capture value for our shareholders.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

In the upstream, we achieved total production of 418,000 gross oil equivalent barrels per day in the first quarter. Volume was supported by higher year over year production at Cold Lake, including continued strong results at Grand Rapids. We also utilized our enhanced winter operating procedures at Kearl to manage through the extreme cold weather conditions in February. Syncrude production was steady year over year. In the downstream, refinery throughput averaged 397,000 barrels per day, which equates to a refinery utilization of 91%, while petroleum product sales averaged 455,000 barrels per day.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Renewable diesel project construction continued at the Strathcona refinery, and we are on track to start up mid twenty twenty five. We paid $307,000,000 in dividends and finished the quarter with nearly 1,800,000,000 of cash on hand. We remain fully committed to returning surplus cash to shareholders in a timely manner and intend to renew our normal course issuer bid shortly towards the end of the second quarter. And with that, I'll pass things over to Dan to discuss our financial results in more detail.

Daniel Lyons
Daniel Lyons
SVP - Finance & Administration at Imperial Oil

Thanks, Brad. Starting with financial results for the quarter, we recorded net income of $1,288,000,000, up $93,000,000 from the first quarter of twenty twenty four, primarily driven by higher upstream margins. When comparing sequentially, first quarter net income is up $63,000,000 from the fourth quarter of twenty twenty four, primarily driven by higher downstream margin capture. Now shifting our attention to each business line and looking sequentially, upstream earnings of $731,000,000 are down $147,000,000 from the fourth quarter, primarily due to lower volumes. Downstream earnings of $584,000,000 are up $228,000,000 from fourth quarter, mainly reflecting higher margin capture.

Daniel Lyons
Daniel Lyons
SVP - Finance & Administration at Imperial Oil

Our Chemical business generated earnings of $31,000,000 up $10,000,000 from the fourth quarter. Moving on to cash flow. In the first quarter, we generated $1,527,000,000 in cash flows from operating activities, excluding unfavorable working capital effects of $233,000,000 Cash flows from operating activities for the first quarter of $1,760,000,000 up $239,000,000 from the first quarter of twenty twenty four. We ended the quarter with $1,764,000,000 of cash on hand. Shifting to CapEx.

Daniel Lyons
Daniel Lyons
SVP - Finance & Administration at Imperial Oil

Capital expenditures totaled $398,000,000 in the first quarter, about $100,000,000 lower than the first quarter of twenty twenty four, driven by project timing. Our full year outlook remains consistent with our previously issued guidance. In the Upstream, first quarter spending focused on sustaining and growing production at Kearl, Syncrude and Cold Lake, And the downstream first quarter spending mainly included continued progress on our renewable diesel project at Strathconan. Moving to shareholder distributions. This morning, we declared a second quarter dividend of $0.72 per share, consistent with our first quarter dividend.

Daniel Lyons
Daniel Lyons
SVP - Finance & Administration at Imperial Oil

A reliable and growing dividend remains the foundation of our free cash flow distribution strategy. We also remain committed to returning surplus cash to shareholders. And as Brad noted, we intend to renew our annual NCIB share buyback program in June. Now I'll turn it back to Brad to discuss our operational performance.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Thanks, Dan.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

I know you've all had a chance to look through the numbers, but

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

I do wanna focus your attention on some of our key performance highlights. Upstream production for the quarter averaged 418,000 oil equivalent barrels per day. Production was down 42,000 barrels per day versus the fourth quarter and down slightly or 3,000 barrels per day versus the first quarter of twenty twenty four, which as you may recall was a record first quarter when adjusting for the XTO divestment, and so off to a strong start for the upstream. We typically do see lower volumes in the first quarter on a seasonal basis versus the back half of the year. In addition, we managed through some extreme cold weather this year in February.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

So let's move on and talk specifically about Kearl. Kearl's production in the first quarter averaged 256,000 barrels per day gross, which is down 43,000 barrels per day versus the fourth quarter and down 21,000 barrels per day versus the first quarter record previously set in 2024. While Kearl got off to a strong start in January, extreme weather conditions rolled in for most of February, conditions we haven't seen since the winter of twenty twenty two. We utilized our enhanced operating procedures, including deliberately slowing down volumes to manage through these extreme weather conditions. And I'm happy to report that Kearl materially improved relative to the first quarter of twenty twenty two under similar harsh conditions when total gross production averaged 186,000 barrels per day.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

That said, we did experience some unplanned downtime in March that impeded a faster recovery. We managed through that as well, and April was a very strong month with production very close to our best ever April production record of 300,000 barrels per day gross. So despite lower volumes year over year, I continue to be very proud of their Kearl team for their hard work, their resilience, and overcoming adversity. And we continue to have great confidence in Kearl and our plans to grow volumes further and continue to lower the unit cash cost as you heard us detail at investor day. A good example of our continued efforts to optimize Kearl is taking place this month.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

In May, we're conducting the planned turnaround at the k two train. The planned turnaround will start next week and is scheduled to be completed by the May. And per our corporate guidance, the expected volumetric impact for the year is around 9,000 barrels a day. Following this year's turnaround, we are targeting to run the k two train for four years, double the previous interval with the next planned turnaround in 2029. Moving to Cold Lake.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

For the first quarter, Cold Lake production averaged 154,000 barrels per day, which is down 3,000 barrels per day versus the fourth quarter of twenty twenty four and up 12,000 barrels per day versus the first quarter of twenty twenty four, primarily driven by Grand Rapids and partially offside offset by production and steam cycle timing. New advantaged solvent assisted SAGD production is enabling transformation at Cold Lake with higher production at lower unit cash costs. Our first quarter results bear that out. Grand Rapids solvent assisted SAGD production continued to exceed expectations with a quarterly average production of 23,000 barrels per day, supporting Cold Lake's volume, but also improving its unit cash cost, which decreased by over $3 US per barrel compared to a year ago. This is exciting and gives us great confidence in future solvent assisted SAGD developments as well as achievement of our production and unit cost goals for the asset.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Just last week, we started the planned turnaround work on the McKeesus plant at Cold Lake. Speaking with the team, the work is progressing well and is expected to be completed by early June with a full year volume impact of 3,000 barrels a day. The next transformation of the Cold Lake asset is the Lemming Fag b project. Construction is materially complete now with commissioning progressing throughout this quarter. We are anticipating first steam to be injected this summer with first production following later in the year.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

The Lemming SAGD project is anticipated to produce an additional 9,000 barrels per day at peak levels. I also wanted to provide a brief update on the EBRT pilot at our Aspen lease. We recently reached a key milestone with successful drilling of the three horizontal well pairs. As a reminder, we are constructing the pilot project this year and next and then intend to start up in early twenty twenty seven. EBRT is a transformative new technology that could be applied to our significant undeveloped in situ oil sands resource base to achieve low cost, lower emission, volume growth for decades to come.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Now just a few comments on Syncrude. Imperial share of Syncrude production for the quarter averaged 73,000 barrels per day, which was down 8,000 barrels per day versus the fourth quarter of twenty twenty four and flat versus the first quarter of twenty twenty four. During the quarter, as a result of unplanned downtime, Syncrude continued to utilize the interconnect pipeline to import bitumen and gas oil, ensuring the upgrader remained full and producing about 15,000 barrels per day, our share of incremental Syncrude suite premium in the quarter. Moving on to the downstream, we refined an average of 397,000 barrels per day, reflecting a utilization of 91%. This compares to 407,000 barrels per day a year ago and 411,000 barrels per day in the fourth quarter.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Lower throughput in the first quarter reflects some additional maintenance conducted in our Eastern manufacturing hub. We're conducting two planned turnarounds here in the second quarter at both Strathcona and Nanticoke as we laid out in our corporate guidance outlook. As a reminder, we have our final planned turnaround at Sarnia later this year, straddling the third and fourth quarters. And finally, we expect to complete construction on the Strathcona renewable diesel project facilities shortly here in the second quarter with unit start up plan for mid twenty twenty five. Petroleum product sales in the quarter were 455,000 barrels per day, which is down 3,000 barrels per day versus the fourth quarter of twenty twenty four and up 5,000 barrels per day versus the first quarter of twenty twenty four.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

And turning now to chemicals. Earnings in the first quarter were $31,000,000, which was up $10,000,000 versus the fourth quarter. Earnings in the quarter were down $26,000,000 versus the first quarter in 2024, primarily due to lower margins and the aromatic segment shift to the downstream, which we announced effective the third quarter of last year. In closing, this was another strong quarter, and I'm very proud of Imperial's positioning for the future. It has been an honor for me to lead Imperial as chairman, president, and CEO for nearly five and a half years.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

I could never have imagined that my journey, our journey, would encompass both the most challenging conditions in the company's one hundred forty five year history during the pandemic, but then followed by several record breaking achievements, both operationally and financially, with the best years in the company's history. I am confident that Imperial will continue to thrive and achieve even greater success in the years to come. I'm also very excited to see our investment decisions coming to fruition, most notably, Grand Rapids that is exceeding expectations, autonomous haul trucks and other reliability and production enhancements at Kearl, and our Strathcona renewable diesel project that is scheduled to start up in the coming months. And these are just a few. From my first day at Imperial, I have been consistently impressed by our team.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

And over the past five years, I've been continually reminded of the exceptional quality of our people. Their ingenuity, their drive, resilience, and focus are evident every day as they work tirelessly to improve our business and provide critical energy supplies to society. The results of this great team have been reflected in our ability to deliver exceptional shareholder returns, and that commitment remains unchanged. I'm extremely proud of what we have delivered for our shareholders in terms of share price appreciation, dividend growth, and returning surplus cash through share buybacks. I'm also pleased to welcome John Whelan, who is anticipated to succeed me as chairman and CEO at our upcoming AGM next week on May 8.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

As I mentioned at investor day, John and I have known each other for over twenty years, and our paths have crossed multiple times. He has worked under my leadership twice during my forty two year career, and we have worked together on multiple leadership teams. John is returning to Imperial after serving as senior vice president of ExxonMobil Upstream company since 2020. And prior to that role, as many of you know, John served as Imperial's senior vice president for the Upstream from 2017 to 2020. With his extensive experience, I'm confident that John is the right person to lead Imperial into the future.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

So as always, I'd like to thank you once again for your continued interest and support and wish you all the best in the future. And although I won't be leading any more of these earnings calls, rest assured, I will be listening and celebrating the company's continued success. And now we'll move to

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

the q and a session. So I'll pass it back to Peter.

Peter Shaw
Peter Shaw
VP - Investor Relations at Imperial Oil

Thank you, Brad. As always, we'd appreciate it if you could limit yourself to one question plus a follow-up so that we can get to all the questions. So with that, operator, can you please open up the line for questions?

Operator

Thank you. And our first question comes from Greg Pardy with RBC Capital Markets.

Greg Pardy
Greg Pardy
MD & Head of Global Energy Research at RBC Capital Markets

Yes. Thanks. Good morning. And look, absolutely great chapter, I think, in Imperial's history. And and, Brad, just all the best to you.

Greg Pardy
Greg Pardy
MD & Head of Global Energy Research at RBC Capital Markets

And, of course, welcome welcome, John. Again, two very different questions, but maybe just on the operations side, I was curious. The downstream numbers looked, you know, really good, and I know you alluded to some margin capture. I'm just wondering if we could dig in a little bit more into perhaps, you know, where you captured additional margin

Greg Pardy
Greg Pardy
MD & Head of Global Energy Research at RBC Capital Markets

in

Greg Pardy
Greg Pardy
MD & Head of Global Energy Research at RBC Capital Markets

the downstream in the first quarter maybe versus others.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Yeah. Thanks for the the questions, Greg, and and and great to hear from you after seeing you at our Investor Day. You know, we we talk extensively about the value of our downstream, the value of integration, the advantages we have structurally here in Canada. All of those have contributed to our success here, in the first quarter in the downstream. But since we got Scott here, you know, maybe I'll ask him to make a few more comments on on what's what's unique, here in the

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

first quarter.

Scott Maloney
Scott Maloney
VP - Downstream at Imperial Oil

Yes. Thanks, Brad. We we've certainly leveraged a lot of those structural advantages, as Brad mentioned before, to place our barrels in the highest uplift opportunities, both on the Eastern and Western Part of Canada. And that's that's structurally what, what helped us deliver these stronger numbers this year.

Scott Maloney
Scott Maloney
VP - Downstream at Imperial Oil

We've also had some volatility in the marketplace, and that volatility gives us some opportunity for, placing those barrels in the highest uplift opportunity. And as you see in typical first quarters, as the quarter goes on, you you start to see some maintenance activity from a turnaround perspective start to play in the last part of the first quarter, and that also enables some, additional margin in the downstream business.

Greg Pardy
Greg Pardy
MD & Head of Global Energy Research at RBC Capital Markets

Okay. Thanks for that. And and a completely different question. I mean, with the renewal of the NCIB, the last number of years has been, you know, really acceleration into the second half of the year. How are you thinking, especially just given a pretty sloppy oil price backdrop?

Greg Pardy
Greg Pardy
MD & Head of Global Energy Research at RBC Capital Markets

Is is the thinking that you'd accelerate or that you would perhaps execute it over a one year time frame, or is it all to be determined?

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Yeah. It's it's it's a great question, Greg. And and there's no doubt there's a lot of uncertainty in the market. You know, what's your with this first quarter results is the strong resilience that we provide, with the integrated nature of of our business model, you know, coupled with just the the underlying strength of of our assets. So that allows us to kinda maintain consistency in our strategies and and avoid, you know, having to make fundamental changes.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

And and with respect to the NCIB, you know, obviously, we're gonna monitor, you know, what those external factors are. You know, we're we're in a very strong cash position right now. We have no reason to believe that's gonna fundamentally change as as we move to the second half of the year. And and so consequently, you know, we'll be taking a decision as we go as to what's the right pace. But as you point out, you know, over the last couple of years, certainly, it's been our behavior, our approach to accelerate the NCIB.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

And and really a key driver there is this underlying principle of we wanna return surplus cash to shareholders in a timely manner. And so accelerating the NCIB in the past has given us that flexibility. And and as we look to the future, you know, we'll continue to make those assessments whether whether that is appropriate or not. You know? And I don't wanna get too far ahead of myself or or ahead of, you know, John and the rest of the leadership team.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

But one of the reasons we've accelerated in the past is to give us flexibility, you know, for an SIB if if that was necessary, to further return surplus cash. So, you know, still a lot of uncertainty several months ahead for for the year. But, you know, what you can count on is we will be returning surplus cash in a timely

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

manner.

Greg Pardy
Greg Pardy
MD & Head of Global Energy Research at RBC Capital Markets

Alright. Thanks very much, and good luck.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Thanks, Greg.

Operator

And our next question will come from Manav Gupta with UBS.

Manav Gupta
Manav Gupta
Executive Director at UBS Group

Good morning, Brad. I think a lot of investors would echo that IMO today is a much stronger company than it was five years ago. I think if you look at the stock price itself exactly five years ago, it was below $21. So the stock price appreciation is clearly reflecting the good work that you have put in. My first quick question here is, as we look at I mean, there's a lot of focus on COL cash cost, but if you look at COL cash cost, again, down about, like, 18% year over year.

Manav Gupta
Manav Gupta
Executive Director at UBS Group

Now you obviously have Grand Rapids doing better than expected and Lemming coming on later in the year. So how should we think about the cash cost at at Cold Lake for the rest of the year and maybe more importantly for 2026?

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Yeah. Thanks for the the comment, Manav, and and and thanks so much words and, you know, in recognition of of what, the whole team has accomplished, you know, which is obviously reflected in our share price, and that has very much been a a collective effort of of this great organization and and team that that have surrounded and supported me over the last five years. With respect to your question, I'm glad you, you you called out Cold Lake. You know, we have talked extensively, over the last years about Kearl because we've been on an important journey to get Kearl to $20 a barrel. We've achieved that now.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

We're working quite diligently to get Kearl to $18 a barrel. But what's been progressing in parallel to that is is a really important strategy, to improve the structural costs at Cold Lake as well. Grand Rapids, and and, you know, SA SAGD as a technology is a key enabler because it fundamentally is our lower cost barrels that we're bringing on. You know, as as I noted, compared to a year ago, Cold Lake's, cash costs are are down $3 a barrel, and and this is all on our journey as we talked about at Investor Day to, to get us to $13 a barrel. So, you know, as the year goes on, we're gonna continue to strive for further improvements, continued, grand rapid success, and and strong volume perform will contribute to that.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

And and then certainly as we start up Lemmy, you know, those are lower cost barrels as well, and so those will further support this journey to $13 a barrel. So, you know, several months ahead of us, but the strategy is that we are continuing to work on our cost structure really across all our assets, but specifically here at Cold Lake and Grand Rapids, Lemmy, everything we're doing, with these these new developments are are targeted towards lower costs lower cost. So I feel quite good about that. I don't know that there's really anything else I I would add at this, but but kinda watch this space because it's really ex what the team is doing at Cold Lake.

Manav Gupta
Manav Gupta
Executive Director at UBS Group

Perfect. My quick follow-up here is you have a unique refining system. You you you get your liver to the East Coast crack, Chicago crack, even the West Coast Crack. We are in a, you know, relatively tougher macro environment. And I just wanted to understand from you, from your refining system, I have you seen any signs of recessionary demand kick in?

Manav Gupta
Manav Gupta
Executive Director at UBS Group

Or or the markets are you supplying to, the underlying demand remains relatively resilient even if the macro seems choppy. So if you could help us with that.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Yeah. Thanks. And, I mean, I think it it is a good question. You know? I think I continue to come back to our resilience.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

You know, we we have a diverse, customer base. You know, we have broad infrastructure cost across the country, and all that allows us to take full advantage of the highest value markets that we see. You know, we have not seen any, you know, material degradation in demand. You know, there are always seasonal variations, in all of our products, but nothing that I would say is is particularly noteworthy at at this point. And, you know, and then also contributing to that is, you know, when you look at product inventories across the country, you know, they not not specifically for us, but for the industry, you know, though and globally, those those inventories are kind of at the lower end of of the five year band.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

So, all that contributes to to strength in the marketplace as well.

Manav Gupta
Manav Gupta
Executive Director at UBS Group

Thank you.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Thanks, Manav.

Operator

And our next question will come from Dennis Fong with CIBC World Markets.

Dennis Fong
Equity Research Analyst at CIBC Capital Markets

Hi, good morning. Thank you for taking my questions. And I'd like to reiterate my congratulations on a job very well done to you, Brad, and an incremental welcome to John. My first question focuses a little bit on the upstream side. I was hoping you could provide a little bit of incremental data points or clarity that really drive the confidence at running four year intervals between major maintenance.

Dennis Fong
Equity Research Analyst at CIBC Capital Markets

As well as can you discuss some of the changes in either equipment or operating procedures that allow you for kinda maybe more minor maintenance to be conducted that has, like, moderate or or little impacts to to output?

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Yeah. Thank thank you, Dennis, and and appreciate, your your comments there at at the beginning. And it's, you know, it's an exciting journey we've been on with turnarounds at Kearl. You think about where we were just a just a few years ago, we were we were conducting two turnarounds, per year, and then moved to one turnaround per year. And now over the last couple of years, we've reduced the duration of each of those turnarounds.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

You know? And as I mentioned, we're getting ready to start one of those turnarounds, here next week, and we, you know, expect to complete it essentially in in the same month, which, you know, historically, we would have never had kind of, you know, turnarounds limited to to just one month in a year. But as we look to the future, we see this as integral and key to continuing to improve our our volume performance and and fundamentally our our cost performance as well. We are planning after this turnaround to be in a position that we can run much longer between turnarounds, you know, and targeting four years. But with that, you know, I've got Cheryl right here.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

She's she's right in the middle of of this strategy and spent a lot of time with the as as they've, refined that approach and and demonstrating to her with confidence that that this is achievable. But maybe I'll let her talk a little bit about some of the details.

Cheryl Gomez-Smith
Cheryl Gomez-Smith
SVP - Upstream at Imperial Oil

Sure. Thanks, Brad. As Brad mentioned, we've been on a journey to optimize our turnaround activity. This year, we are spending time to do the work that'll support this further extension to a four year interval. So what's made the difference?

Cheryl Gomez-Smith
Cheryl Gomez-Smith
SVP - Upstream at Imperial Oil

And what I would say, along this journey, we've been integrating technology, really looking at our data and analytics to make better decisions. We've been benchmarking, continuing to leverage those those global learnings. And then one of the things that you heard during investor day is I mentioned that we're sitting on a foundation of a continuous improvement mindset. And especially when I think about turnaround activity and how we optimize that, it's really focusing on driving clarity and a relentless focus on what needs to be done in a turnaround versus what we can do outside of a turnaround. So those are you know, there's not a a single item there.

Cheryl Gomez-Smith
Cheryl Gomez-Smith
SVP - Upstream at Imperial Oil

It's a mix of all of those enablers that are really gonna get us from where we are right now to this four year interval.

Dennis Fong
Equity Research Analyst at CIBC Capital Markets

Great. I really appreciate that that incremental clarity. My my second question here is is maybe targeted to to Brad and and maybe John. Through time, Imperial has acted opportunistically and even countercyclically in terms of spending or deploying capital, especially as compared to some

Dennis Fong
Equity Research Analyst at CIBC Capital Markets

of your

Dennis Fong
Equity Research Analyst at CIBC Capital Markets

peers. Given the combination of the balance sheet strength that you see today, the longer duration of view that Imperial, takes on investment cycles, how are you strategically thinking about potentially taking advantage of all the uncertainty we see today in the market?

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Yeah. Thanks thanks for that question. And and, you know, certainly, that has our strategy in in in the past of, you know, ensuring that we are optimizing our our capital, you know, how we target specific projects and, you know, really focused on highest return. And, you know, I I take that part of your underlying question is really about m and a type opportunities. And as I mentioned in the past, you know, the the aperture has always been open and you know?

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

But the bar is high because, you know, we we have a very high quality portfolio today, and so anything we would pursue would have to compete with that. And so, you know, I I don't expect that's gonna fundamentally change, but, you know, John is here, and and he'll he'll be kinda steering the ship now in the future. And so maybe I'll let him talk a little bit about that.

John Whelan
John Whelan
President at Imperial Oil

Yeah. Thanks, Brad. No. And and I think it will not fundamentally change. I think it you know, first, maybe I should say, you know, I'm really humbled and excited to return to Imperial in this role.

John Whelan
John Whelan
President at Imperial Oil

And as a Canadian, you know, to have the opportunity to lead this company with such a long, proud Canadian history of over a hundred and forty five years, you know, truly is an honor. I also and I would echo many of the comments that were in the questions and opening remarks today that I recognize I have some really big shoes to fill coming in behind Brad. As he's mentioned, we've known each other for over twenty years, and I know what a great leader and a great person he is. And, and Imperial's performance under Brad has been outstanding, and I'm committed to making sure that we continue that outstanding performance going forward. And I'm committed to ensuring our shareholders and stakeholders and employees are proud to be a part of and associated with this company.

John Whelan
John Whelan
President at Imperial Oil

But you what you'll see under my leadership, you know, Imperial's strategy to win will remain very consistent, and it's really about increasing cash flow and delivering unmatched industry leading shareholder returns. And and that focus will be the same. It'll be on maximizing the value of our existing assets, targeted optimization and continued structural cost improvements. It's gonna be investing on select growth opportunities within those assets like enhancements at Kearl and Cold Lake and Strathcona. And then progressing some future strategic growth, you know, when we think about our in situ business and continuing to assess opportunities as the, you know, energy transition landscape evolves and then utilizing technology and so on to to take advantage of that in our in our relationship with ExxonMobil.

John Whelan
John Whelan
President at Imperial Oil

So you'll see a very consistent strategy, which I think has been a successful strategy as we go forward. I'll be working very hard to leverage our competitive advantages. I think we have advantages that others do not have around technology, around scale, integration, ex execution excellence, doing the right thing the right way to a high standard each and every time, and and what Brad talked about our people. You know, we've got the best people, the best team in the business with world class capabilities built up over generations through rigorous, development and challenging cross functional assignments that that really do give us the best business the best people in the business. So the way I look at it is, you know, we're gonna take those competitive advantages that are unique to us, apply them to our advantaged assets and opportunities, and that's gonna deliver leading value creation and, unmatched industry leading shareholder returns going forward.

John Whelan
John Whelan
President at Imperial Oil

So I'll just use that opportunity to say that. I I also wanna say thanks to Brad and the whole team here who've been, you know, very gracious with their time, onboarding me over the last month and a half or couple of months, and we've had, you know, very kind of structured, thoughtful, rigorous handover. So thank you.

Operator

And our next question will come from Menno Holzhoff with TD Cowen.

Menno Hulshof
MD - Equity Research at TD Securities

Good morning, everyone, and congrats to the both of you. I'll start with a question on the the February. It sounds like your open in your opening comments, Brad, it sounded like things went reasonably well under the circumstances. But were there any additional earnings that came out of that beyond what was learned in 2022? And do you have any new ideas on on work that could get done to to mitigate downtime related to extreme cold going forward?

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Yeah. Thanks thanks, Menno, and and appreciate kinda your your question. And I'm gonna turn it over to Cheryl in in a minute, but but I would just, reflect on, you know, this February was a challenging February from a weather standpoint. But as I mentioned, you know, we we learned from the 2022 incident around kinda what were some operating improvements we could put in place. We developed, some additional protocols, which now we put in effect, and and really leverage them to get us through a similar period this year than what we saw in 2022, but with much, much better results.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

And so, you know, while I would say it was unfortunate that the net result was still lower volumes compared to, last quarter or last I'm quite proud and and think it it further demonstrated the strength of those protocols. But as always, there's learnings and insights, and we're gonna continue to strive to be better, in these sort of situations when they occur in the future. And so maybe I'll ask Cheryl to comment a little bit on some of those, you know, insights that we gained and, you know, how we're going to learn from those, in in the future.

Cheryl Gomez-Smith
Cheryl Gomez-Smith
SVP - Upstream at Imperial Oil

Sure. And thank you, Brad. And maybe a little bit of start. The cold weather protocols we ex weather conditions. So think of this 25 degrees Celsius minus 35 degrees Celsius.

Cheryl Gomez-Smith
Cheryl Gomez-Smith
SVP - Upstream at Imperial Oil

And what we do is reduce throughput aligned with our equipment strategies and focus on maintaining equipment integrity. February 2022 or 2025 was, in the Fort McMurray region, one of the highest number of cold extreme cold days versus 2022. We applied the learnings from 2022, and the protocols worked as intended. And and and Brad mentioned, of course, we've from a production with April, very strong month with production just below our best ever, still on target to meet external guidance. In terms of what comes next, and that's a great question.

Cheryl Gomez-Smith
Cheryl Gomez-Smith
SVP - Upstream at Imperial Oil

Going forward, we're looking at where can we build capacity and redundancy. And I mentioned during IR Investor Day some of the things that we're doing with our hydro transport lines, and what that allows us is to further strengthen this performance going forward to, quote, unquote, weather the storms.

Menno Hulshof
MD - Equity Research at TD Securities

Okay. Thanks for that. And oh, sorry. I think my phone cut out. I think I'm interrupting.

Operator

No. Go go ahead, sir. You're still open.

Menno Hulshof
MD - Equity Research at TD Securities

Oh, okay. Terrific. Yeah. So maybe, yeah. Thanks for that.

Menno Hulshof
MD - Equity Research at TD Securities

It's very helpful. Maybe I'll just, second question is on the EVRT pilot that, was touched on in in the prepared remarks. Could you maybe just expand your comments on the the scope of the pilot and the, I guess, the more important pieces, the key deliverables that you've identified that ultimately constitute success? And then how are you risking the overall chance of success of eB BRT ultimately, I suppose, being a catalyst for ASPEN sanctioning?

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

I'll I'll let Cheryl comment on that again.

Cheryl Gomez-Smith
Cheryl Gomez-Smith
SVP - Upstream at Imperial Oil

Sure.

Cheryl Gomez-Smith
Cheryl Gomez-Smith
SVP - Upstream at Imperial Oil

So as as Brad mentioned, we're constructing a short term small scale pilot, and this is to test the commercial potential of our enhanced bitumen recovery technology Aspen Lease in the Fort McMurray area, start up in 2027. And we're gonna run the pilot for several for several years, and there's three key areas that we really need to validate. One of them is the production uplift. The second one is around overall recovery, And then the project itself is really dependent on solvent recovery. The pilot is intended to derisk these technologies,

Cheryl Gomez-Smith
Cheryl Gomez-Smith
SVP - Upstream at Imperial Oil

and this is

Cheryl Gomez-Smith
Cheryl Gomez-Smith
SVP - Upstream at Imperial Oil

a step that we've taken with all technology. So as as highlighted before, this is a transformative technology, and it will allow us to be more globally competitive, capitally efficient, and highly resilient. So it even though we are looking at this, this we need to take the time, and this is a a staged approach really to derisk the technology. So that's the time we'll be taking with the, the pilot going forward.

Menno Hulshof
MD - Equity Research at TD Securities

Thank you. I'll, turn it back.

Operator

Thank you. And that does conclude the question and answer session. I will now turn the conference back over to Peter Shaw, Vice President of Investor Relations for closing remarks.

Peter Shaw
Peter Shaw
VP - Investor Relations at Imperial Oil

Thank you. And so on behalf of the management team, I thank you for joining us this morning. If there's any further questions, please don't hesitate to reach out to anybody on the Investor Relations team. We'd be happy to answer your questions. And with that, I'll add one more thank you to Brad for his time over the last five point five years at Imperial, and we wish everybody on the call a great day.

Brad Corson
Brad Corson
Chairman & CEO at Imperial Oil

Thank you.

Operator

Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.

Executives
    • Peter Shaw
      Peter Shaw
      VP - Investor Relations
    • Brad Corson
      Brad Corson
      Chairman & CEO
    • Daniel Lyons
      Daniel Lyons
      SVP - Finance & Administration
    • Scott Maloney
      Scott Maloney
      VP - Downstream
    • Cheryl Gomez-Smith
      Cheryl Gomez-Smith
      SVP - Upstream
    • John Whelan
      John Whelan
      President
Analysts
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Earnings Conference Call
Imperial Oil Q1 2025
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